In this week’s crypto, blockchain and NFT update, eToro market analyst and crypto expert Simon Peters explains the Ethereum ‘merge’, VC firm A16z’s launch into a major new fund focused on DeFi and Web3 projects and why Elon Musks’s SpaceX will accept dogecoin.

Crypto assets continue to face volatility

Bitcoin kept its value steady around US$30,000 last week, despite some renewed volatility for the cryptoasset. The price of a coin fell over the course of the week, reaching to lows around US$28,000 but rallied late in the week to back above the US$30,000 level.

Ether experienced a more difficult week of trading, beginning over US$2,000 and falling close to US$1,700 at points on the eToro platform. ETH is now trading back around US$1,900.

Cryptoassets are still facing volatility and investors more generally decide on comfortable levels after multiple weeks of falls. With markets and crypto now correlating much more closely than before thanks to institutional participation, the question looming over the asset class is when those investors will start dipping their toes back in.

US markets saw a modest revival last week with stocks rising across the board. Although crypto didn’t see quite the same revival, prices have now been holding steady in major cryptos such as bitcoin, suggesting a ‘calm’ of sorts before any fresh commitment to the market is made by large players.

Ethereum merge is on

The upgrade for the Ethereum blockchain, dubbed ‘the merge’, has been slated for August by founder Vitalik Buterin. The potential implications for the entire ecosphere of crypto cannot be underestimated.

Also referred to as Ethereum 2.0, the merge would see the blockchain, which underpins a significant proportion of crypto infrastructure globally, make a fundamental shift from a proof of work model to proof of stake. What this means in practice is the blockchain will no longer reward miners but will instead reward ETH holders with yield for staking the token.

This will have the effect of rewarding those invested in the blockchain and encouraging further participation. The impact of this on the token could be deflationary, as the cryptoasset rises in value thanks to new network participants. It could in turn create a very different kind of investment case from what has been the case until now for Ethereum.

Ethereum is an enormously influential blockchain. Unlike bitcoin which is essentially useful as a store of value or for financial transactions, it allows for all manner of innovations, with a wide array of projects based on it. Such a major change will come with significant potential implications for the price of the underlying tokens.

A16z launches huge DeFi fund

VC firm A16z has launched a major new fund focused on DeFi and Web3 projects. The US$4.5 billion fund is a significant mark of support for a sector that has been buffeted by markets in the past few months.

The fund will focus on Web3 investments and is a boon for the sector, especially given the wider market conditions. It is a big statement of intent from a VC firm and rivals other significant investment commitments in size and scope from influential investment houses in recent weeks.

What this suggests is while markets are roiled by wider geopolitical and economic issues, the underlying business of building blockchain projects continues and opportunities are still rife in a sector driven by innovation. The long-term outlook, based on the activities of these institutional players, looks strong.

SpaceX joins Tesla in taking dogecoin

One of Elon Musk’s other major projects, SpaceX, has announced it will also begin accepting dogecoin as payment for merchandise, alongside Tesla.

Musk, as is typical of the eccentric billionaire, announced the news on Twitter, similar to his past pronouncements around dogecoin. His tweet caused a brief price spike, with doge rising to $0.08370. The news has done little to help an otherwise troubled trajectory for the token, which has seen its value more than halve since the beginning of the year.

While the announcement that SpaceX is to accept doge is unlikely to move the dial much, the broader implications of adoption of cryptoassets such as dogecoin into payment infrastructures cannot be underestimated. We’re a way away from the ‘tipping point’ but each firm that makes an announcement like this brings that point a little closer.